Ford Shows Acceleration as Honda goes into Reverse

News, 28 April 2008

DEARBORN, Michigan: Ford posted a net income of $100 million (€64m; £50m) in the first quarter of this year – compared with a loss of $282 million in Q1 2007 – surprising many analysts and bucking the trend of a flat auto market, which saw Japanese rival Honda report a dip in profits of some 10%.

Cost savings totalling some $1.7 billion – and based on job cuts and plant closures – were one of the major drivers of Ford's improvement, and go some way towards its aim of achieving $5bn in savings by next year as part of its Way Forward initiative.

By contrast, its quarterly revenues were down $3.6bn to a total of $39.4bn, although the company reported they would have improved if adjusted to reflect the sale of its Aston Martin, Jaguar and Land Rover marques.

The auto giant dropped just 0.1% in market share to a total of 15%, while its Volvo marque made a pre-tax loss of $151m, compared with a $94m profit a year ago, a result said to have been influenced by the weakening value of the dollar.

Ford still predicts it will end this year with a loss, but ceo Alan Mulally said: "Our plan is working and we continue to show significant progress. We will keep making adjustments plant by plant, vehicle by vehicle."

The drop in profits at Honda – which is the second biggest auto maker in Japan – was the company's largest in 10 years, with net income down 86% to ¥25.4bn ($244m; €156m; £123m) for the quarter, and sales down by 1% to ¥3.06 trillion.

The company also took out an ¥80bn provision to cover a US taxation investigation, and is said to have also suffered from the strength of the yen against the dollar, and the rising cost of steel in Japan.

Data sourced from the Financial Times (UK)/Bloomberg; additional content by WARC staff

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